“Commercial property wasteland” a possibility

19 January 2009

The highstreet could become “a commercial property wasteland” in 2009 unless steps are taken to mitigate the impact of vacancy on retail real estate.

Security firm, G4S Security Services, warns that the surge in vacancy rates threatens to undermine the long-term value of commercial property. Following the collapse of chains like Woolworths and MFI, 90,000 retail outlets are expected to be vacant by the end of February, with 135,000, or 15 per cent of all UK shops, predicted to fall vacant by year-end.

If these properties are not managed properly they will be vulnerable to environmental deterioration, criminal damage and infestation – all things which will undermine property values when the economy turns up. Squatters, graffiti, fly-tipping and fires represent other potential problems.

Richard Fenton-Jones, managing director, monitoring and response at G4S said: “The economic downturn has already resulted in a surge in vacant premises across the country and this is set to get much worse, particularly in the retail sector. 

“With company administrators looking to reduce costs across vast portfolios of soon-to-be vacant properties, it is more important than ever to ensure that sufficient security measures are in place.”

The potential also exists for energy efficiency legislation to aggravate problems in the retail property sector. According to research by environmental consultancy Envos, most of the 90,000 vacant outlets will not be legally saleable or rentable because they don’t yet have Energy Performance Certificates (EPCs). The legislation requiring commercial property owners to obtain an EPC before marketing or letting a property came into force on 4 January.

Envos’s research showed that 90 per cent of commercial properties don’t have an EPC and aren’t in the process of getting one, which equates to 1.6 million commercial properties.